What is the Difference between a Credit and Credit balance

Sometime a credit and credit balance may be confusing like doubt of a debit and debit balance. So, to go to learn the difference between a credit and credit balance is necessary. With this, you can also apply to know the difference between a debit and debit balance.

Meaning

A Credit : A credit may be the credit of account in journal entry or posting of account with amount to the credit side of any account.

Credit balance : If Credit side of any account is more than debit side of any account, difference will be credit balance.

For Example

A Credit : You have bought stock from ABC Company on credit. So, ABC Company is our creditor, its account will be credit in the journal entry of purchase.

Purchase account Debit

ABC Company account Credit

In ABC Company account, we will credit purchase account with its amount because this is payable amount. So, in the liability account, it must be credit.

Credit Balance :We we total of ABC company account's both side. Debit side total is $ 10,000 and credit side total is $ 20,000, difference of credit side total and debit side total is $ 10,000. This excess of credit side over debit side is the credit balance of ABC Company which is $ 10,000.

Classification of Accounts

A Credit : Normal all the liabilities and incomes will be in the credit side of any entry.

Credit Balance : Normally all the liabilities will have credit balance. There will not any balance of incomes account at the end of financial year because all the incomes account will transfer to profit and loss account.

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